How the Latest Fed Hike Will Affect the Footwear Industry

In a show of optimism about the American economy’s resilience, markets saw the Federal Reserve raise interest rates yet again — their highest level since 2008.

Jerome Powell, in his first meeting as chairman, approved the central bank’s new benchmark funds to a range of 1.5 percent to 1.75 percent, marking the sixth hike since the financial crisis. While this might seem daunting for the average consumer with debt or mortgages, the increase is actually a sign of continued health and strength in the economy. According to Andy Polk, senior vice president at the Footwear Distributors and Retailers of America, this also translates to the shoe industry — with one caveat.

“The rate hike implies that our economy is improving, which is a good thing,” he said. “People are buying more shoes, but higher rates do pose a challenge for footwear companies, which need loans to expand and grow because it will now cost them more to borrow.”

The Fed also signaled that it’s on track for two more hikes this year, aligned with last December’s projections, as well as hikes in both 2019 and 2020. However, some officials and economists are saying that it’s likely the central bank will end up raising interest rates four or more times in 2018 — and if so, the message for retail players is clear.

“This is unlikely to be the last rate hike this year, which means if a business needs to use loans to expand, it should do so sooner rather than later,” Polk added. “This latest hike may have only a modest impact on people’s savings and footwear demand, but continued hikes are something retailers will need to keep an eye on over the next year, as interest rates presumably will keep getting bumped up.”

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